The U.S. Department of the Treasury published a 2024 Non-fungible Token (NFT) Illicit Finance Risk Assessment. The risk assessment explores how vulnerabilities associated with NFTs and NFT platforms may be exploited by illicit actors for money laundering, terrorist financing, and proliferation financing.
The assessment finds that NFTs are highly susceptible to use in fraud and scams and are subject to theft. The report determines that illicit actors can use NFTs to launder proceeds from predicate crimes, often in combination with other methods to obfuscate the illicit source of proceeds of crime. It also found little evidence of the misuse of NFTs by terrorists or proliferators, in contrast to fraudsters, to date.
“This risk assessment demonstrates Treasury’s commitment to analyze illicit finance risks of newer technologies and communicating them to industry and law enforcement,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “I encourage the private sector to use the findings of this assessment to inform their own risk mitigation strategies to prevent illicit actors from abusing NFTs and NFT platforms.”
The assessment finds that inadequate cybersecurity protections, challenges related to copyright and trademark protections, and the hype and fluctuating pricing of NFTs can enable criminals to perpetrate fraud and theft related to NFTs and NFT platforms. Moreover, some NFT firms and platforms lack appropriate controls to mitigate risks to market integrity and to combat money laundering and terrorist financing, and sanctions evasion. The assessment recognizes that mitigation measures, such as industry tools, law enforcement authorities, and analysis of public blockchain data, can partially mitigate such risks.
To address outstanding risks, the risk assessment recommends several U.S. government actions, including:
- Raising awareness within industry of existing obligations
- Continuing to enforce existing laws and regulations related to NFTs and NFT platforms; and
- Considering further application of regulations to NFTs and NFT platforms
The assessment of NFTs delivers on a Treasury’s commitment to publish an NFT risk assessment in the 2022 Digital Asset Action Plan to Address Illicit Finance Risks and builds upon recent National Risk Assessments and the 2023 Illicit Finance Risk Assessment on Decentralized Finance, all published by the Treasury Department.
Click here to read the “Non-fungible Token Illicit Finance Risk Assessment.”
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